Lionsgate reports record first quarter

Steve Beeks says company is growing dramatically

Consumer spending on home video may be flat, but thanks largely to an influx of higher-profile theatrical features Lionsgate has managed to boost its first-quarter share of consumer spending, sales and rentals combined, to a record $575 million, for its best-ever market share showing of 9%.

Company president Steve Beeks made the announcement Sunday night at the independent studio's annual retailer "summit" on the eve of Home Media Expo 2008, the video retail trade show, in Las Vegas.

Beeks noted that of Lionsgate's total revenue of $1.36 billion in fiscal 2008, which ended April 30, nearly half, or $623.5 million, came from home entertainment, mostly DVD sales. That's an increase of nearly $100 million from fiscal 2007.

"It was a great year for us," Beeks said. "Lionsgate has been growing dramatically, especially in the last four or five years. We've grown in what many are calling a mature market and we are focused on continuing to grow and take share."

Indeed, with 12 theatrical feature films on its slate between now and Christmas -- 10 of them wide releases opening on more than 2,000 screens -- Lionsgate is looking for another record-breaking quarter in the first three months of 2009.

"They're going to take this company to a different level," said Ron Schwartz, executive vp and GM of Lionsgate's home entertainment division. He predicts Lionsgate could finish the first quarter of 2009 ahead of at least one, maybe two, of the six majors.

Lionsgate also is optimistic about the future of home entertainment, with Blu-ray sales more than making up for any slowdown in DVD sales and growing from a projected $1 billion this year to more than $10 billion in 2013, according to company analyst Michael Youn, vp strategic planning and business development.

Acknowledging media reports of a sluggish home entertainment sector that ultimately will consist mostly of digital downloads, Youn noted a highly publicized Forrester Research report from 2003 that predicted DVD sales would drop 9% by 2008 while VOD spending would increase more than 300% to $4.2 billion.

"They were wrong," Youn quipped, noting that DVD sales actually rose 9% over the past five years while VOD spending increased just 30% to $1.3 billion.

"Lionsgate takes a bullish stance on the future of packaged media and the home entertainment industry overall," Beeks told the gathering of more than 100 key retailers, including Blockbuster Inc. CEO James Keyes.

"We believe that there is growth left in the DVD business, driven by Blu-ray, but we also embrace digital delivery as we look to strike a balance with digital options and packaged media."

Lionsgate's strong home entertainment showing isn't surprising, given the studio's penchant for action, teen comedy and horror genre films with theatrical grosses generally below $50 million, prime fare for home video.

Lionsgate's theatrical pipeline for the third and fourth quarter is one of its most ambitious yet, highlighted by the Kate Hudson/Dane Cook comedy "My Best Friend's Girl" in September; the Oliver Stone-directed "W" in October; the latest "Saw" horror sequel, also in October; sequels to two more Marvel Enterprises films, "The Punisher" and "The Transporter" (November/December); and yet another new Tyler Perry release (September).

Through acquisitions, Lionsgate also has beefed up its library in the TV-DVD, family, fitness and direct-to-DVD arenas. In July, Lionsgate -- now the No. 1 independent supplier of TV series -- will release on DVD the first season of the award-winning AMC series "Mad Men." Thanks to recent distribution deals with HIT Entertainment, Leap Frog and Little Tikes, Lionsgate -- already home to animated titles in the Marvel and Bratz lines -- now has a 15% share of the nontheatrical family market and is aiming for a 20% share of the preschool market.

Lionsgate's fitness category continues to generate strong sales with such franchises as Jillian Michaels, "The Biggest Loser" and "Dancing With the Stars" joining staples Kathy Smith and Denise Austin.

And on the direct-to-video front, a recent deal with Ghost House, the production company headed by Sam Raimi, has given Lionsgate a new horror franchise, Ghost House Underground, which debuts in October with eight DTV horror titles.
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